Sunday, March 13, 2016

How the ECB recharge its monetary bazooka – Challenges.fr

The European Central Bank (ECB) announced Thursday, March 10 a new series of monetary policy measures, including a reduction of its central rate to zero for the first time in its history. Engaged in a battle against inflation too low, the ECB cut its three policy rates. She will also swell to 20 billion euros a month to 80 billion, the volume of its debt repurchases in the market, and expanded the range of eligible securities for these transactions. Finally it will launch in June a new giant loan program long term to banks.

These measures go beyond market expectations, which were just waiting in increased redemptions of debt and a decline a key rate, the deposit rate. European stock markets cheered, with a jump from these announcements, 2.5% in Frankfurt, more than 3% in Paris at 1300 GMT for example.

Banks again watered cash

in detail, the central key rate, credit barometer in the eurozone, goes to zero, against 0.05% where it was stationed since September 2014. both rates that frame, the deposit rate and the marginal lending , pass -0.40% and 0.25% respectively.

in addition, in April, the monetary institution will buy 80 billion euros of debt each month, against 60 billion now part is its “QE” program. In parallel, she decided to make them eligible for such purchases of bonds issued by non-financial companies in the euro zone, particularly expanding the scope of its action. Finally the banks will again be watered liquidity, with new loans which TLTRO long-term and very advantageous rates.

The aim of all these measures is to encourage banks to move money in the economy, to start credit, prices, and growth. For three years the rise in consumer prices in the eurozone systematically lack the objective of the ECB, a figure close to but below 2%.

Growth forecasts revised downwards

in addition, the ECB also lowered its inflation and growth forecasts for the euro area for 2016 and 2017, noting in particular the weakness of oil prices.

L monetary institution Frankfurt particular drastically lowered its inflation forecast for this year from 1% to 0.1%, according to figures released by its president Mario Draghi. The ECB expects inflation of 1.3% in 2017 -against before- 1.6% and 1.6% in 2018. The gross domestic product (GDP) is expected to be lower than was hoping for so far the ECB: 1.4% in 2016, 1.7% in 2017 and 1.8% in 2018.